What To Consider When Buying A Coffee Shop Franchise in 2020
I get it. The idea of having your own coffee shop on the corner of Main and Main in your hometown is exhilarating. Whether you start your own business entirely or buy into a coffee franchise, you can already smell the fresh ground espresso beans permeating through your beautifully designed space, you can see the familiar faces of your regulars, and you can hear the hustle and bustle of people gathering in your shop to catch up with old friends and relax to the perfectly curated music playlist.
(Before we jump in, if the investment level described below is a little out of reach for you or the process of starting a coffee shop described below seems overwhelming, there are alternative coffee businesses out there that would allow you to achieve your coffee shop ownership dreams without the huge investment or startup hassle.)
So where do you start? Well, first you’ll need capital. If you search online, you’ll find various answers for how much it will cost to start up a coffee shop, but if you look at established franchises that are basing their estimates on actual historical costs, you’ll find that Coffee Bean and Tea Leaf costs between $185,000-$361,500 to open, Dunkin Donuts is $217,000-$1.6M, and Scooters Coffeeshop is $331,000-$648,000. These are just a few examples, but it gives us an idea of what it costs to open a coffee shop that is based on real data compiled over thousands of store openings.
Next, you need to secure real estate, which will likely take between 90 and 180 days at minimum. Landlords often require you to personally guarantee the lease so your personal financials will need to be approved and they’ll want to see that you’re not investing every last nickel into the business. After you pay an attorney to review and negotiate the lease terms, you’ll officially have an address for your coffee shop!
Once the lease is secured, you can approach your local building and permits department to apply for a permit. Some municipalities can get this done in a few weeks, while others are notoriously slow and can take up to 6 months or longer.
Now that you’ve received approval to begin construction, you’ll need to hire an architect, a general contractor, and begin sourcing materials. If you’ve invested in a franchise, a lot of this is going to be standardized so you won’t need to invest too much effort here. If you’re on your own, you’ll need to design a functional space, choose your furniture, fixtures, and equipment and manage the construction process from A to Z.
You’ll also need to begin building a supply chain. What types of coffee beans will you offer and where will they come from? What about cups, stirrers, milk, and baked goods? What kind of pricing makes sense for your business model and can you negotiate terms with the suppliers that allow you a shot at making money?
Hopefully people just show up and walk in the door ready to purchase coffee, but in case that doesn’t happen, think about how you would advertise and market your business and what you’d be willing to spend on a monthly basis to generate traffic.
So how much money can you make once you get through the opening process described above? Coffee Shop Startups says that “on average, a small-to-medium-sized coffee shop can produce between $60,000 to $168,000 in personal income per year.” Not bad. On the low end of the spectrum, you could make your money back in just 3 years if you don’t pay yourself a single dollar and keep your initial investment to $180,000. On the high end, you could pay yourself a pretty good wage, and make your investment back in just a couple of years, again assuming that you keep your initial investment to the absolute low end of things.
So, there you have it. Best of luck to you if you’re considering starting up a coffee shop!
Again, if you don’t quite have the funds for a coffee shop or the opening process seems overwhelming, there are alternative coffee businesses out there that would allow you to achieve your coffee ownership dreams without the huge investment or startup hassle.